How does a certificate of deposit work?

Question

Once you get one, can you add more money to it?

Answer 1

you "buy it" from the bank, the bank then either sells it (it is a negotiable note) or holds it. Whoever holds the note if out in the marketplace investing in things, making loans to other parties, etc. If they pay you 3%, they are making 6% using that money and pocketing the difference.

For you, it works pretty much just like a savings account accept you can't (shouldn't) get back your money for a set period of time.

While you don't technically "add" to it, you could certainly put more money on deposit at any time at similar or the same interest rates

Answer 2

You earn an interest based on the time frame of deposit with the bank. It's like a savings account, however you can't withdrawl the money until the it matures. It could be 1 month to 5 years or so. If you withdrawl the money early, the bank will charge you a fee. It's usually 1 or 2 months.
CDs are good if you don't need to use the money and don't think the interest rate is going to rise. You can lock in the rate for a time frame. However, if you can do internet banking, most banks pay 5% for a savings account which is close to or higher than most 1 year CDs. With a savings account, you can withdrawl at any time. I would rather do that. ie. HSBC is offering 5.05% interest on online savings that can be link to your HSBC checking or money market account. By doing so, you can transfer money back and forth with no ease to max you savings. They are offer 6% now for new money until a certain date. At the bank, you have to put in over $50,000 to get just 4.5%. They are all FDIC insured.

Answer 3

In the simplest language it is merely a "savings account" that you don't touch for the agreed upon number of months or years and you will receive a certain interest rate depending upon that length of time chosen.

You do not add to it for they are agreed upon ahead of time on the amount of this CD. You can however start a new one at anytime you want and have multiples in numerous banks all over the country if you so desire.

You do not OR should NOT take from it for you agreed to keep it there for a certain amount of time. If you MUST take from it, it is allowed but you will get a hefty penalty and risk losing any interest and possibly some of the principal (the amount you put in).

These are safe ways to save money and earn a tiny amount of interest... Keep in mind when a bank offers and % rate versus an APR rate. Percentage rate and Annual Percentage rate ARE different though many will have you believe they are the same !!!

: ) Happy saving!

Answer 4

First what you need to do is go to different banks and ask them what is the CD rates... Then you can ask them about it and opening a CD account with them. The best place to start first is go to your bank and ask them about the CD rates..

Also, CD is just a way to save money... Its like you promise to lend the bank your money for 5months to 1yr and in return they give you 4% or 5% interest for the money you lend them... if you were to need your money before the 5 months or 1 year, they would actually minus 2 to 3 months of interest earned... I hope this helps, but if you visit your bank branch they can tell you more, but pretty much thats the idea.. of a CD

Of course, you can always add more money to the cd account after you open it.. But i think you should save another chunk of money and open another CD... You can have more then 1, 2, 3 cd's...

Answer 5

It doesn't work like all bank accounts. Will lose purchasing power after texes and inflation. Avoid. Usually must open another rather than add to an exisitng 1 if you insist on having them.